Stakeholders from the medical, transportation, and energy sectors met to discuss the Industrial Cooperation Program (ICP), which has yet to be implemented even after a year. During the meetings, they requested pre-planning of public procurement and a structure similar to the Undersecretariat of Defense Industry (SSM).
Public procurement, with an annual potential of approximately 114 billion TL, is one of the pillars of our country's economic future, playing a crucial role in enabling domestic producers to develop their technologies, creating new employment opportunities, and most importantly, closing the current account deficit.
The parties will come together at the 'Conference on Enhancing the Effectiveness of the Industry Cooperation Program in Public Procurement,' to be held on April 26, 2016, under the auspices of the Ministry of Science, Industry and Technology, in collaboration with the Ankara Chamber of Commerce's Special Expert Commission on Domestic Contribution and Offset Applications in Public Procurement, OSTİM, and ODTÜ Technopark.
Prior to the April 26 meeting, which is expected to provide a new perspective and highlight shortcomings arising from current practices, preparatory workshops were held in the fields of Medical, Transportation, and Energy, hosted by the Ankara Chamber of Commerce (ATO). Representatives from the public sector, private sector, and universities shared their views and suggestions regarding developments from the Strategic Investment Plan (SIP) to the present day during these workshops.
During the three-day sessions, numerous topics, ranging from the $10 million threshold and technology transfer to market opportunities and financing practices, were examined meticulously, with the precision of a jeweler.
>SALİH BEZCİ
Chairman of the ATO Board of Directors
“OFFSET SHOULD BE INCLUDED WHEN AGREEMENTS ARE MADE”
Offset is extremely important. We are the first among chambers of commerce in Turkey to do this. We are very happy about this. Our colleagues are working with great dedication. OSTIM is the locomotive of Ankara in this regard. I know the products they make. They produce spare parts that are almost like spare parts for airplanes. In addition, they produce parts for high-speed trains. OSTIM does everything. As ATO (Ankara Chamber of Commerce), we value OSTIM very highly. That is why we are here with you today. What we want, especially in public procurement, from our government, is that they absolutely include offset when making an agreement. I have great confidence in OSTIM. There is nothing OSTIM cannot do.
>RECAI KESIMALATO Board Member
“IT IS THE FUTURE OF THE COUNTRY”
There is a general consensus among people that when it comes to offset, explaining its importance and meaning directly is the most important part. When we talk about offset, we mean the future of this country. It is actually a structure that directly incentivizes all production areas, from the defense industry to everything else you can think of.
Therefore, it is very important for our country. Looking at it from the perspective of the ideas and impressions I gained from directly participating in the commission's work, this work needs to be further developed and seen as a form of national consciousness. Every patriot should perceive this as the future of the country and contribute directly to its work.
>ORHAN AYDIN, Chairman of the Board of Directors of OSTİM
“THEY PUT UP BARRIERS IN OUR MINDS”
This is an area where the Undersecretariat of Defense Industry has been implementing policies for many years and has made very important contributions to Turkey in terms of industrialization. However, on the civilian side, the global world saw us as a market and dictated the rules of the free market economy to us so that we could sell our goods. But what we needed to do was not what they dictated. We needed to find the way and method for our country's development, progress, and industrialization. They dictated this to us, and for a long time we thought we didn't even need to discuss it.
"This is impossible, it cannot be done! Because it doesn't comply with free market conditions, it doesn't align with them. It doesn't comply with European Union requirements!" However, these were barriers placed in our minds. We have seen through experience over time that this is not the case at all. As of now, we have all seen that this can be done on the civil side as well, within the framework of the laws of the Republic of Turkey, European Union laws, and World Trade Organization regulations.
The Industrial Cooperation Program is an official regulation of the Ministry of Science, Industry and Technology. So it is possible. We are late. The public sector makes annual purchases totaling 114 billion TL, and we just watch. We cannot mobilize our country's resources and capabilities. We need to fill this gap quickly. Although this legislation was enacted a year ago, it is not widely implemented in the public sector.
>MUSA PIRECIATO, Chairman of the Offset Commission
“EVEN IN UGANDA IT’S 60%”
Local firms should produce more and more efficiently. They should be the flagship of the sectors. We want technology transfer and the development of our own technologies. We established the Offset Commission at the Ankara Chamber of Commerce and Industry (ATO) for the first time in Turkey. We didn't know what it was. We've come a long way in 3 years. If it's done at 60% even in Uganda, I think it can definitely be done in this country as well.
Today, our country has reached a certain position. The greatest benefits of offsetting are seen in reducing the current account deficit, increasing employment, and many other areas. We have made progress in defense. We are doing this in health, energy, and transportation. We are on the right track. We are putting our best efforts into it. Our aim is to help our industrialists and producers reach their full potential and pave the way for them.
>MEHMET KINACI, Vice Chairman of the ATO Offset Commission
“THIS ISSUE IS OUR FUTURE”
First of all, we thank OSTİM. We believe that this matter concerns our country, our nation, and the future of our children. May God grant us success in this endeavor.
>ZİYA KEMAL GAZİOĞLU, Member of the ATO Offset Commission
“SEPARATE UNDERSECRETARIATS SHOULD BE ESTABLISHED IN THREE MINISTRIES”
I am someone who has followed the success story of the Undersecretariat of Defense Industry. I believe that this success story can be replicated in energy, transportation, and health. Currently, only the Ministry of National Defense has two undersecretariats. A similar organizational structure to the Undersecretariat of Defense Industry should be established in the Ministry of Health, the Ministry of Transport, Maritime Affairs and Communications, and the Ministry of Energy. If we can ensure the establishment of an undersecretariat in each of these three ministries and accelerate the processes there, we will achieve success, starting with health and extending to energy and transportation.
>ZÜFER ARSLAN, Head of Investment Models Department, Ministry of Health
“DOMESTIC FIRMS' CAPABILITIES HAVE BEEN DETERMINED”
Following the regulation published by the Ministry of Science, Industry and Technology, we have published our Ministry's implementation circular. The basic principle in the circular is that international firms can participate in tenders for products for which we do not possess the technology. Firms with at least 51% or more international participation, or those with higher levels of technology, can participate in the tender.
When the winning company collaborates with a local firm, we plan to set the minimum percentage of local firms within the consortium at 51%. And that's exactly what we planned and did. Because we need to acquire the technology in some way and make it sustainable. Our primary goal is to utilize local infrastructure in collaboration with international firms. Our second goal is to attract investment from international firms to Turkey.
With the SIP (Strategic Investment Plan) application, our plan is to bring the technology of international companies to Turkey, while also making other sub-industries usable and disseminating them within the work packages in the sub-components.
As a ministry, we have currently decided to tender for Hepatitis A under the Industrial Development Commission. It has been included in the SIP (Strategic Investment Plan). Draft tender documents have been prepared. Hopefully, it is planned to be completed within 2016. In addition, medical devices will also be evaluated under the SIP for several products. The studies on these have also been completed. The competence of domestic firms has been studied. In particular, the competencies of domestic firms regarding the products covered by the SIP have been determined. We will negotiate with international firms accordingly regarding who can do what, to what extent, how we can evaluate them, and how sub-processes that are not currently available can be brought to Turkey.
>İLHAN ŞAHİN, Chairman of the Board of Directors of OSTİM Medical Industry Cluster
“STRUCTURAL REFORM IS NEEDED”
The structure of our companies working in the medical industry is somewhat different from that of the defense industry. These are smaller companies. Offset is a large-scale undertaking. I believe that structural reform is needed to transform these efforts into a positive outcome. Could this be transformed into a system that doesn't disrupt these efforts and doesn't cause difficulties for small businesses, which we call SMEs?
The work of the defense industry is exemplary, but when we look at the size of our companies, they are not really large-scale. We have concerns both in terms of numbers and whether, when these studies come to our country later, we might only hinder the completion phase of the studies.
>PROF. DR. SEDAT ÇELİKDOĞAN, Chairman of the Board of Directors of OSTİM Technology Inc.
“TURKEY'S POTENTIAL IS VERY HIGH”
Offset is something Turkey needs to address for a certain period. The highest value-added offset study in Turkey was conducted at the Prime Ministry in 1996. You shouldn't give away your markets too easily. Offset is very important for us. We want to get back half of the money we give abroad; we want to gain employment in our own country. Today, Turkey's potential is much higher. Don't have any doubts about offset. You can do it even if you write it at the highest figures.
We are still spinning our wheels on an issue that everyone else has resolved very quickly. There are those who don't believe in Turkey's potential. Why? Because they don't know Turkey. These issues should be written about by those who believe in Turkey's potential. Don't be afraid to act boldly. Our friends who believe in this should emphasize this everywhere. Decision-makers who don't know Turkey say, "How can we do this? We wrote 51 [seats], but what if we can't do it?"
>BILAL TEK, Head of Industrial Policies Department, Ministry of Science, Industry and Technology
“SUPPORTING INNOVATION IN THE EU THROUGH PUBLIC PROCUREMENT”
Domestic production and innovative manufacturing are at the heart of our Ministry's policy. We are always on the side of the industrialists. The SIP (Strategic Investment Program) is not an offset program. It is a systematic approach within itself, inspired by a model previously implemented by the Undersecretariat of Defense Industry. It may be difficult to understand, but it may have certain challenges due to its lack of implementation. It can be revised based on the problems that arise during implementation.
Both government action plans and policy documents identify health, energy, and transportation as priority sectors. The IT sector is also an important sector and should be included here. In the 4.5G tender, the contract signed by the BTK (Information and Communication Technologies Authority) includes a domestic content requirement. Despite it not being a public tender, the total investment, without applying price advantages, must utilize 30% domestic products in the first year, 40% in the second year, and 45% in the third year.
As a ministry, we prepared this legislation. We are also ready to provide support on every platform for its implementation. The establishment of a Public Procurement Coordination Board under the Prime Ministry is on the agenda for the upcoming period. It is also included in the Government Action Plan. The private sector and the public sector need to come to the same point together.
The Strategic Investment Program (SIP) is a model that envisages the transfer of products, services, and technologies that cannot be produced in Turkey. There are categories here: Category B, Category C, Category D. The EU's 2020 strategy also clearly states that innovation can be supported through public procurement. Defending domestic production is essential for our country's development.
>PROF. DR. MURAT YÜLEK, Faculty Member, Istanbul Commerce University
“IF YOU DON'T HAVE INDUSTRY, YOU DON'T EXIST IN THE WORLD”
For a country like ours to exist in the world, the indispensable condition, as far as I understand, is industry. If you don't have industry, you don't exist in the world. If you have industry, you exist in the world. And as far as I can see, the most important tool for the development of industry is for public procurement to be freed from lack of coordination, directed towards a national goal, and for not a single penny to be wasted.
Istanbul has many metro systems. Unfortunately, each one was purchased from a different European company as a separate model, and even the spare parts don't fit together. The spare parts manufacturing industry hasn't even been established due to scale limitations. There are companies and people who could produce the spare parts; it would be profitable. But even this isn't being done. We've bought each one from a different country. We've given each one away as a separate market in the midst of a crisis. With this kind of logic, there's no way Turkey can industrialize.
>MÜNİB KARAKILIÇ, General Manager of Renewable Energy
“WE ARE IMPORTING EQUIPMENT”
Today, an opportunity has arisen for Turkey. Currently, production capacity exceeds consumption, and it is time to take necessary measures. If we can seize this opportunity and carry out the necessary work, we will turn this opportunity into positive outcomes for our country in the coming period. One of the biggest contributors to Turkey's current account deficit is dependence on foreign energy sources. We are almost 98 percent dependent on foreign sources for natural gas and 92 percent for oil. Work is underway to further develop capacity in domestic coal.
When we look at renewable energy sources, we don't pay for the raw materials. However, to convert these raw materials into electrical energy, we import advanced technology equipment from abroad and spend a significant amount of money on it. Localization and nationalization in equipment and device production are crucial. Domestic production that lacks nationalization has a limited contribution.
>YAŞAR ÇELİKOSTİM Chairman of the Board of Directors of Renewable Energy and Environmental Technologies Cluster
“THERE IS DISPERSION”
Currently, there are 4 GW of unconnected power plants with a financial value of 4 billion euros. Some of this is being done by the private sector, and some through grants. For example, under the IPARD Project, the Ministry of Agriculture will make purchases worth 18 million euros. A grant… Another ministry will make purchases in a different way. Municipalities will make purchases… The amount is so large, and yet we cannot produce solar cells domestically. Why? It's not that we lack economies of scale, but there is disorganization. There needs to be a regulation that can bring this disorganization together. The area where we have the largest current account deficit is energy. This regulation is a new application for our country. It is a study that we see as a source of hope.
OPINIONS
Medical
The $10 million limit in the SIP (Strategic Investment Program) is excessive. It doesn't seem to provide added value to our companies.
What are the protective factors for domestic producers in the SIP? These should be fully explained.
In technology transfer, the level of cutting-edge technology is also very important.
According to the authorization criteria, large companies should be created that can cooperate with large international companies. We also want SMEs to benefit from this.
The example of the Undersecretariat of Defense Industry should be applied and adapted to ministries on a sectoral basis.
Intersecting technological areas should be identified. The necessary technology should be brought in. Resources should not be wasted by focusing on technology that we cannot sell.
Products that can be included in the SIP should be proposed.
Relatively old generation technologies are being used, not new technologies developed by global giants. The company that will invest will want the state and the market; will it want a single market or will it also sell to neighboring countries? Attention should be paid to these issues. 9. The domestic partnership structure in the current circular may not be operational; if this step is to be taken, it will require a Turkish company with a significant presence in the electronics field to establish a partnership.
To what extent do the conditions in the SIP (Strategic Investment Plan) cover the software sector? There is a significant dependence on foreign sources in healthcare software. Is there a strategy in this area?
The sector, in particular, is very weak; it needs to develop a model and be strengthened.
Transportation
The study is important, but it's also necessary to ensure its feasibility. A support and control mechanism for its implementation is crucial.
Within the scope of the SIP (Strategic Investment Plan); the selection of firms that will provide the technology and the identification of the main producer and subcontractors that will carry out the production are important. The subject should be clearly explained to the selected producers and subcontractors. The continuity of the technology must be ensured.
Authorization criteria should be determined. A pool of firms should be formed based on competencies.
A common need is the Undersecretariat of Offset, which is under the Prime Minister's office.
An institution other than a public institution must also participate in the suitability review and conduct on-site inspections and audits.
Needs should be determined in advance by the public sector, and those that can be included within the scope of the SIP should be identified beforehand.
Strengthening the infrastructure in Turkey is necessary for industrial cooperation.
Firms wishing to provide services from abroad need to go through similar processes in Turkey, and we need to have our own standards.
It has been one year since the legislation was enacted. No public institution has used this to do any work.
Without a purchase guarantee, it is very difficult for our industry to develop on its own and become capable of meeting the needs of the public.
Production without design will not bring much added value in the long run.
Energy
If public procurement is planned in advance, large quantities of goods will be purchased, and the private sector will find ways to transfer technology and carry out the work themselves.
Procurement needs to be guaranteed by improving product quality, and this should be a state policy.
Experiences are gained by going to foreign countries. Although there are serious delays, these can also be turned into opportunities.
A good inventory should be made nationwide. It should be examined who can do what, and who has the ability to acquire the technology.
The acquired technologies should be nationalized and then transformed into commercially competitive products.
Localization should be a public policy. Public will is necessary.
There may be shortcomings in projects undertaken for the first time. An insurance system should also be implemented.
The public sector should make a reference to the domestic contribution in every tender.
Not only written documents but also decisions are important and critical.
When supporting industrialists, the process should begin with guaranteed customers and financing in the market. 11. There is no specification for the system as a whole.
Photos
